'Liquidity glut to power IPO revival once volatility ebbs'

Amid heightened market volatility and a visible slowdown in deal activity, Mahavir Lunawat, chairman and managing director of Pantomath Capital, believes India’s capital markets are undergoing a structural shift rather than a cyclical downturn. With domestic liquidity at record levels and a robust pipeline of initial public offerings (IPOs), Lunawat, in an interview with Samie Modak in Mumbai, says the current phase could reset valuations without derailing long-term capital formation. Edited excerpts:

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How is the ongoing volatility impacting domestic equity capital markets?

■ While the spike in volatility is a concern, two or three fundamental factors make the Indian market structurally resilient rather than purely cyclical.

First is India’s demographic advantage — a large, young population and a sizeable domestic market. Second, strong growth in new-age sectors such as electronics, defence, aviation, rare earth, and renewable. At the same time, traditional sectors like engineering and manufacturing continue to grow steadily, as India is both a large domestic market and a reliable global partner. Together, these create strong demand drivers and a robust consumption story.

Another key difference today is the nearly ₹6-8 trillion funds that remain undeployed in equities. The formalisation and channelisation of savings into capital markets have created a large liquidity pool.

Earlier, market cycles were heavily dependent on foreign flows. Today, strong domestic liquidity has made cycles shorter. Instead of long multiyear bull or bear phases, we now see several cycles within a year. Once volatility settles, available liquidity could trigger a sharp upswing in capital formation across both private and public markets.

But with markets correcting, IPO valuations also need to adjust. Are issuers willing to recalibrate expectations?